The Legislature of California, on March 24th, 1868, (Statutes of 1867-8, p. 259) contracted with S. A. Bishop and others, the grantors of defendants, that he and his co-grantees and their assigns should have the right to lay down, maintain, and operate a railroad over a certain designated route for twenty years, provided they should comply with their part of said contract, viz:
1. That the rails should be of iron, and of good and substantial make.
2. That they should run cars thereon every day at convenient hours for the transportation of passengers.
3. That the track should be laid flush with the streets.
4. That the cars should be of a substantial nature, and so constructed as to insure comfort and convenience to passengers.
5. That the same should be run at a moderate speed.
6. That the railroad should be paved or macadamized, as the city authorities should direct.
7. That the railroad should be built in a certain time.
All these things and others the grantees were to do, or their contract was ended under the express provisions of sec. 7. All this they have done.
On October 4th, 1875, the City of San Jose, through which a portion of said railroad runs, passed an ordinance requiring the defendant to pay a license tax for the privilege of complying with its own contract.
It would appear that the bare statement of the action would be its own answer. The city--or stating most favorably for plaintiff, the Legislature, through the city--after having deliberately made a contract, onerous and stringent upon us, but with which we have strictly complied--a contract upon the strength of which we have invested our money--now seeks to violate it. We submit that good morals, the law, and the two Constitutions themselves, both State and Federal, protect us from this injustice. (Const. of Cal. art. 1, sec. 16; Const. of United States, art. 1, sec. 10, subd. 1; Mayor v. Second Av. R. R. 32 N.Y. 261; Mayor v. Third Av. R. R. 33 N.Y. 42; Stein v. Mayor, 20 Am. 283.)
But the Legislature never attempted to give the city such power.
The power it has is found in Stats. 1875-6, p. 628, where it says: " To license and regulate all and every kind of business authorized by law and transacted and carried on in said city; to fix the rates of license tax upon such business."
Arailroad is not a business within the meaning of these clauses. If it were, still it is not a business transacted or carried on in the city within the meaning of the law. As well might we say that the Southern Pacific or Central Pacific Railroads were liable to this tax because part of their roads were within the city. Or, carrying it one step further, every merchant or business man in the State would be liable to this tax, the ramifications of whose business might happen to extend to San Jose. Assuming, however, this is the kind of business referred to, still the city has a right to do what? To regulate and to license it. We need no license permitting us to operate the railroad, for we already have the permission--in fact, it is a part of our duty under the contract with the sovereign. Nor do we think the city could regulate the railroad, for all the necessary regulations are fully and minutely prescribed by the sovereign and made a part of the contract. Were it otherwise, however, the city could only put on a license tax sufficient to cover the expense of enforcing its regulations of the railroads. This is the true construction of their power. (Cooley Const. Lim. 201.)
The citynever attempted to regulate the railroad, and it is apparent that the only object of this ordinance was revenue.
We claim that each of these grounds is an answer to plaintiff's action.
JUDGES: Crockett, J. Mr. Justice Rhodes did not express any opinion.
OPINION
CROCKETT, Judge
The franchise granted by the Act of March 24th, 1868, to Bishop and his associates, to construct a railroad track along and through certain streets of the City of San Jose, and to run cars thereon, is not a contract in such sense as to exempt the business or occupation of operating the road from all proper police regulations, or from taxation in the same manner as other occupations may be taxed, under legislative authority. (Cooley on Taxation, 385-86; Frankford etc. R. R. Co. v. Philadelphia , 58 Pa. St. 119; Johnson v. Philadelphia , 60 Pa. St. 445.)
The charter of the City of San Jose, in defining the powers of the Common Council, authorizes it, amongst other things, " to license and regulate all and every kind of business authorized by law, and transacted and carried on in said city, and to fix the rates of license tax upon said business." In construing a similar power conferred upon the Board of Supervisors of the City and County of San Francisco, we said in Ex parte Frank , 52 Cal. 606, " when the power conferred upon the corporation, as in this case, is to 'license and regulate' callings and occupations, a question has sometimes arisen in the Courts, whether, under such a grant of power, the corporation could exact license fees for purposes of revenue, or should be limited to a sum reasonably sufficient to defray the expense of granting the license. (Dillon on Mun. Corp. 291.) But the rule as stated by Judge Dillon is, that in construing the words of the grant the whole charter and general legislation of the State respecting the subject-matter must be consulted in order to determine whether by the terms " license and regulate" it was intended to authorize licenses for purposes of revenue. Tested by this rule, we held that the power to " license and regulate" occupations in San Francisco included the power to raise revenue for municipal purposes by means of license fees; and the same rule of construction is applicable to the power conferred on the Common Council of San Jose. Indeed, the charter itself designates it as a " license tax upon such business," indicating clearly that it is a tax on the occupation, and not merely a license to carry on the business.
That the Legislature of this State has the power under the Constitution to tax occupations and to authorize municipal corporations to tax them, was settled as early as the case of People v. Coleman, 4 Cal. 46, and we are not aware that the proposition has ever been denied or questioned in any subsequent case. On the contrary, it has been recognized and reaffirmed in Sacramento v. California Stage Company, 12 Cal. 134; Sacramento v. Crocker, 16 Cal. 120; Ex parte Hurl, 49 Cal. 557.
The point made by counsel, that the defendant is not subject to the tax because its cars are not employed wholly within the corporate limits of San Jose, is not tenable. The complaint avers and the answer does not deny that the defendant has its principal place of business in San Jose, and that it has run its cars through the City of San Jose to the adjoining Town of Santa Clara. In Sacramento v. California Stage Company, supra , the point was made that the defendant was not subject to the tax, because its business of conveying passengers in stage coaches was conducted chiefly outside the corporate limits. But the Court held the point to be untenable, and we think correctly.
At the argument, counsel expressly waived any question as to the right of defendant to employ powers by it employed, or to enjoy the franchises granted to its assignors.
Judgment reversed and cause remanded.